Dolce and Gabbana fined $441 million for tax evasion

A woman walks down an empty street in downtown Milan August 28, 2012. REUTERS/Alessandro Garofalo

The decision confirmed to Reuters by Italy’s tax agency on Tuesday relates to payments the agency says should have been made when the designers sold their D&G and Dolce & Gabbana brands to their own Luxembourg-based holding company GADO in 2004.

The authorities ruled that the designers engineered the transaction to avoid paying taxes in Italy, where corporate tax rates are among the world’s highest.

Dolce and Gabbana, known for their Sicily-inspired style, were not available for comment on Tuesday, though they have repeatedly denied any wrongdoing.

“GADO operated as an ‘ad hoc’ safe, an operation to carry out illicit international fiscal planning aimed at saving taxes,” the Tax Commission said in its February ruling, which was filed on March 20 and first surfaced in the Italian media on Saturday.

The designers can ask to have the fine suspended until they exhaust the appeal process.

“The fact is that I didn’t do anything!” Gabbana said on Twitter on Saturday.

Fans of the designers voiced their support on Twitter, some encouraging them to leave Italy, others urging them to fight to clear their names.

Dolce and Gabbana are also facing a separate criminal trial in Milan relating to the same case. Neither have yet appeared in court and the trial is expected to continue for months.

Italian authorities have intensified efforts to collect taxes in recent years, targeting groups such as jeweler Bulgari to check whether they have complied with fiscal rules.

Previous tax cases involving celebrities in Italy have led to out-of-court settlements.

In 2000 the late opera singer Luciano Pavarotti paid more than $12 million in back taxes, while former MotoGP world champion Valentino Rossi agreed to pay $51 million to Italy’s tax agency in 2008 after a lengthy investigation.